China firms 'fake' profits

The news may deter foreign investors from putting their money in China

One in ten Chinese companies have been reporting fake profits, an annual government survey has found.

The country's top auditor has also said that two out of three state owned companies posted inaccurate financial statements last year.

The news - likely to be a deterrent for foreign investors - comes as China attempts to crack down on fraudulent accounting and share price manipulation.

The firms surveyed had reported well over $1bn in false assets and profits.

The finance ministry accused two listed firms - Beiman Special Steel and Fujian Fulian - of irregular accounting practices.

"We investigated 320 companies in the annual check conducted this year on corporate financial statements," an official at the Finance Ministry's supervisory department said.

"Thirty-two firms had posted profits for 2000 when they actually made losses.

"We published the results of the investigation as part of efforts to rectify market order."